Sustainable living has been at the forefront of popular discussion for some time now, but especially as of late. For instance, there has been a series of international strikes and protests in September 2019 centering around climate change. The movement’s purpose is to pressure leaders across the world to act against the climate crisis, and soon.
Businesses are realizing the necessity of implementing more sustainable practices, not only because of changing consumer preferences but because of the inherent impact and influence that companies have on the environment. Pressure can also come from investors and stakeholders as well as new laws and regulations aimed at promoting environmentally friendly practices.
When it comes to sustainability and business, procurement is one of the most impactful branches of a company. After all, procurement departments are the ones responsible for the acquisition of goods and services, which heavily impacts how the business functions as a whole. Thus, if a business wishes to be more sustainable, its procurement department should be closely involved in the process.
Identifying Concerns & Benefits
According to EcoVadis, a provider of business sustainability ratings, sustainable procurement can be defined as the adoption and integration of sustainability principles into procurement processes and decisions. It encompasses both product and materials sustainability as well as the sustainability of supplier practices.
When a business decides to implement greater sustainability, there are many objectives to consider, including reducing greenhouse gas emissions, eliminating slave labor, avoiding plastics, conserving water used in production, tapping into renewable energy sources, and more. A popular concern among businesses is that addressing one or more of these objectives through their supply chain and procurement practices will cost more, but that’s not necessarily true. Other concerns may include a lack of internal resources and the inability to effectively and efficiently track supplier sustainability performance.
According to a report published by the World Economic Forum, executing sustainable procurement can have several benefits. Potential benefits include revenue growth, cost reduction, improved brand reputation, increased employee morale and productivity, risk mitigation, and higher market value. In summary, it’s a win-win, but it requires a willingness to play the long game. It requires looking beyond initial investment and short-term financial effects to the bigger picture, which is based on long-term advantages and what the World Economic Forum calls the “triple advantage” of simultaneously benefiting profit, the environment, and society.
Strategies for Sustainable Success
As with many ventures, it helps to look to other companies that are active in their sustainability initiatives as examples. More and more companies are jumping on this green bandwagon, including major corporations such as Walmart, Apple, and PepsiCo.
One such initiative is Walmart’s Project Gigaton, which thus far has avoided 93 million metric tons of emissions toward the company’s 1-billion-ton goal, which they hope to achieve by 2030. In an announcement earlier this year, Walmart claimed that more than 1,000 of their suppliers have committed to the project. Another is PepsiCo’s goal to expand its sustainable plastics vision by using 25% recycled content in its packaging by 2025.
As inspiring as these initiatives are, it takes more than goal setting to achieve sustainable success. It takes consistent action and evaluation. Still, all strategies have to start somewhere. Here are three simple and universal steps that procurement departments can take to begin planning their sustainability pursuits:
- Benchmark your industry and competitors while utilizing your internal strengths and resources. If the undertaking of sustainable procurement sounds overwhelming, seek first to understand the needs of your customers as well as the practices of your professional peers. Sustainable procurement is rising in popularity, which means there is plenty of information out there. Next, identify sustainability champions within your company who can offer insight and help form a plan of action.
- Set realistic goals based on thorough research and real numbers. The main goal is to make strategic sourcing as manageable as possible. In other words, your sustainable procurement practices should be just that: sustainable. Understand your company’s readiness and identify “quick win” spend areas to focus on initially. Then, gather data and calculate risk, set an attainable and quantifiable goal based on that data, and create a detailed roadmap that aligns with your company’s overall mission, internal stakeholders and core business strategy. For example, companies may choose to measure a double bottom line that takes sustainability into account alongside profit, which is exactly what Opower did as a part of their sustainability mission to inspire people to save energy. The company reported saved kilowatt-hours generated from the mission alongside the dollar value of sales.
- Monitor and measure supplier performance. Before you can apply your sustainable strategy, you must know your suppliers. Communicate goals and understand challenges on their end. Once your priorities and values are clear, assess current contracts and seek out new vendors as necessary. Forming and applying a supplier code of conduct is important, though it can be one of the more challenging aspects of sustainable procurement. However, there are many resources and tools that can assist companies in this endeavor. For example, the United Nations (UN) Global Compact published a guide titled Supply Chain Sustainability: A Practical Guide for Continuous Improvement, which outlines in detail how to design a supplier code of conduct based on the UN Global Compact Ten Principles and other recognized international standards.
As the commitment to sustainability rises on a global scale, it becomes more crucial for companies to follow suit. As much as sustainable procurement is a good deed for the environment, it can also be good business when enacted responsibly. So why not go green?
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